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Due to the low oil prices which have crippled the Venezuelan economy, Venezuela has imposed price caps and currency controls to control inflation and depreciation of its currency. This has affected Indian exporters who are finding it difficult to receive payments.

Trade

Indo-Venezuelan trade statistics

Indo-Venezuelan trade stood at $12 billion for FY2014-15. The trade skews highly in favour of Venezuela.

However, the trade shrank drastically during FY2015-16. While Indian exports declined to $125 million, Venezuelan exports reduced to $5.2 billion.

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10 May 2016

India trying to resolve payment issues with Venezuela

The Indian Commerce Ministry is trying to solve the crisis arising out of the non-payment of dues by Venezuelan importers to Indian exporters.

Venezuela's oil-dependent economy is undergoing a difficult phase due to low oil prices in the international market.

Hence, in order to check the declining Indian exports to Venezuela, India has sent a new mechanism of payment for approval to Venezuela.

Mechanism

The proposed payment mechanism

According to this proposed mechanism, a certain portion of Indian importers' payment to Venezuela will be stored in SBI's Venezuelan branch.

This money will be kept under a Vostro account in SBI Mumbai.

When the Venezuelan importers receive Indian goods, they will direct SBI Venezuela to release payments which in turn, will be received by Indian exporters through SBI's Mumbai branch.

Venezuela's consent awaited

The proposed mechanism solves the non-payment crisis. However, since the balance of trade is highly tilted towards Venezuela, the money mainly belongs to Venezuela. Hence, its consent is awaited to make this mechanism operational.